(Ast) Iysb Quicknotes Afar Preweek 2021

AFAR QUICKNOTES REVIEW
By: ATTY. IVAN YANNICK SAROL BAGAYAO CPA, MBA
ADVANCE FINANCIAL ACCOUNTING AND REPORTING

PREWEEK LETURE
PARTNERSHIP:
PROBLEM A: Aldrin, Benny and Carlo, new CPAs, are to form a partnership. Aldrin will
contribute cash of P50,000 and his computer that originally cost P60,000 but with a
second-hand value of P25,000. Benny will contribute P80,000 in cash. Carlo, whose
family sells computers, will contribute P25,000 in cash and a brand-new computer with
printer that cost his family’s computer dealership P50,000 but with a regular selling price
of P60,000. The three agree to share profits and losses equally.
Upon formation, capital balances are

RPCPA- a. b. c. d.
adapted
Aldrin P75,000 P80,000 P88,333 P110,000
Benny 80,000 80,000 88,333 80,000
Carlo 85,000 80,000 88,334 75,000
Suggested Solution: (A)

Capital Contribution:
Aldrin – 50,000 + 25,000 (at second hand value) = 75,000
Benny – 80,000
Carlo – 25,000 + 60,000 (at market value) = 85,000
*note that the priority as regards the valuation of non-cash assets are as
follows:
1. Agreed value which is normally equal to the fair market value (FMV)
2. If there is no agreed value, use Fair Market Value (FMV)
3. If there is no FMV, use Book or Carrying Value (BV or CV)
4. If there is no BV or CV, use Cost
*note further that inventory may be valued at lower of cost and NRV (net
realizable value) unless the Agreed, Fair or Book values are clearly
determinable.
PROBLEM B: On March 1, 2020, Floyd and Manny decided to combine their businesses
and form a partnership. The balance sheets of Floyd and Manny on March 1 before
adjustments show the following:
Floyd Manny
Cash P 9,000 P 3,750
Accounts receivable 18,500 13,500
Inventories 30,000 19,500
Furniture & fixtures (net) 30,000 9,000
Office equipment (net) 11,500 2,750
Prepaid expenses 6,375 3,000
P105,375 P51,500
Accounts Payable P 45,750 P18,000

Floyd, Capital 59,625
Manny Capital . 33,500
P105,375 P51,500
They agreed to provide 3% for doubtful accounts of their accounts receivables and
found Manny’s furniture and fixtures to be under-depreciated by P900.00.
1
If each partner’s share in equity is to be equal to the net assets invested, the
capital accounts of Floyd and Manny could be
RPCPA- a. b. c. d.
adapted
Floyd P58,170 P58,320 P59,070 P104,820
Manny P33,095 P32,945 P32,195 P 50,195
suggested Solution: (C)

FLOYD MANNY
Unadjusted capital 59,625 33,500
(write-off AR) -(18,500*3%)= (555) (13,500*3%)=(405)
(Under depreciated) (900)
adjusted capital 59,070 32,195
PROBLEM C: TOKYO and NAIROBI share profits and losses equally after salary and
interest allowances. TOKYO and NAIROBI receive salary allowances of P40,000 and
P60,000, respectively, and both partners receive 10% interest on their average capital
balances. Average capital balances are calculated at the beginning of each month,
regardless of when additional capital contributions or permanent withdrawals are
made subsequently within the month. Partners' drawings of P3,000 per month are not
used in determining the average capital balances. Total net income for 2019 is P240,000.
TOKYO NAIROBI
January 1 capital balances P200,000 P240,000
Yearly drawings (P3,000 a month)(36,000) (36,000)
Permanent withdrawals of capital:
June 3 (24,000)
May 2 (30,000)
Additional investments of capital:
July 3 80,000
October 2 100,000
.
i
1. What is the weighted-average capital for TOKYO and NAIROBI in 2019?
A. P226,000 and P245,000
B. P203,333 and P221,167
C. P221,333 and P239,167
D. P256,000 and P220,000
2. What will be the total amount of profit allocated to salary and interest
distributions?
A. P 93,800
B. P146,200
C. P147,100
D. P240,000
ii
. 3. How much is the share of TOKYO and NAIROBI in 2019 profit?
A. P100,000 and P140,000
B. P109,050 and P132,950
C. P114,525 and P 125,475
D. P140,000 and P100,000
2
suggested solution: (1.A;2.C; 3.B)

1. Answer is (C).
TOKYO:[(P200,000 × 5) + (P176,000 × 1) + (P256,000 × 6)]/12 = P226,000
NAIROBI:[(P240,000 × 4) + (P210,000 × 5) + (P310,000 × 3)]/12 = P245,000
. 2. Answer is (B)
Capital: (P226,000 + P245,000) × (10%)= P47,100
Salary: (P40,000 + P60,000) = P100,000
Total: P47,100 + P100,000 = P147,100
. 3. Answer is (B).
TOKYO NAIROBI TOTAL
SALARIES 40,000 60,000 100,000
INTEREST (226,000*10%)= (245,000*10%)= 47,100
22,600 24,500
REMAINDER (50%) = 46,450 (50%) = 92,900
46,450
TOTAL 109,050 130,950 240,000
iii
. Assuming that the partnership started operation on June 30, 2019, How much
is the share of TOKYO and NAIROBI in 2019 profit?
A. P100,000 and P140,000
B. P109,050 and P132,950
C. P114,525 and P 125,475
D. P140,000 and P100,000
suggested solution: (C)
TOKYO NAIROBI TOTAL

SALARIES (40,000*6/12)= (60,000*6/12)=30,000 50,000
20,000
INTEREST (226,000*10%*6/12)= (245,000*10%*6/12)= 23,550
11,300 12250
REMAINDER (50%) = 83,225 (50%) =83,225 166,450
TOTAL 114,525 125,475 240,000
PROBLEM D: MARK, DAVE and JIM are partners with capital balances of P448,000,
P1,560,000 and P680,000 respectively, sharing profit and losses of 6:4:2. JAMIE is
admitted as a new partner bringing with him expertise and is to invest cash for a 25%
interest in the partnership, which includes a credit of P 420,000 bonus upon his
admission.
1. How much cash should JAMIE contribute?

A. P 336,000
B. P 420,000
C. P 756,000
D. P3,024,000
2. How much should be the credited to Jamie capital?

A. P 336,000
B. P 420,000
C. P 756,000
D. P3,024,000
3
Suggested Solution: (1.A and 2.C)

(3) (2)
Partners TCC TAC Debit / (Credit)
Mark (6) 448,000 238,000 210,000
Dave (4) 1560,000 1,420,000 140,000
Jim (2) 680,000 610,000 70,000
JAMIE 336,000 (4) 756,000 (420,000) bonus
(25%)
TOTAL 3,024,000 3,024,000 0 (1)
Note: since Adjusted Capital of A) Distribute Bonus to new

the problem is the OLD partners partner JAMIE using Original
silent as to the with total of 75% PL ratio:
revaluation, interest:
the Total 6
420,000 x 12 = M
contributed 238,000
Capital (TCC) +1,420,000 4
shall be + 610,000 420,000 x 12 = D
EQUAL to the 2,268,000 (75%)
Total Agreed ÷ 75%
2
420,000 x 12 = J
Capital (TAC) 3,024,000 (100%)
Total Agreed
Capital (TAC)
PROBLEM E: ABY, BEA and CLARA are partners who share profits and losses in the
ratio of 5:2:3, respectively. On January 1, 2017, they decided to liquidate the partnership
and the statement of financial position was prepared as follows:
LIABILITIES &
ASSETS CAPITAL
Cash 5,000 Liabilities 6,000
Non Cash 50,00
Assets 0 BEA, Loan 7,000
CLARA ,Loan 2,500
ABY ,Capital 17,450
BEA, Capital 12,550
CLARA, Capital 9,500
55,00 Total Liabilities &
Total Assets 0 Capital 55,000
The following transactions occurred as a result of the liquidation process:
1. How much total cash should the partnership distribute in order to apply the
profit or loss ratio of all partners in distribution?
A. P11,550
B. P 14,100
C. P 20,500
D. P 25,200
2. Using Cash Priority Program (CPP), How much is the amount to be received
by ABY; BEA and CLARA for the month of January?
A. P 0; 3,500; 3,500
B. P 3,500; 1,400; 2,100
C. P 0 ; 7,000, 0
D. P 7,000; 3,500; 2,100
3. Using Cash Priority Program (CPP), How much is the amount to be received
by ABY; BEA and CLARA for the month of February?
A. P 0; 3,125; 3,125
B. P 3,125; 1,250; 1,875
C. P0; 1020; 5,230
D. P 0; 5,230; 1,020
4
Suggested Solution:
JANUARY FEBRUARY MARCH APRIL

Beg. Cash 5000.00 2000.00 1000.00 2500.00
Proceeds 10500.00 6000.00 10000.00 5000.00
(Liabilities) (6000.00) 0.00 0.00 0.00
(Liq. exp) (500.00) (750.00) (1000.00) 5000.00
(Cash WH) (2000.00) (1000.00) (2500.00) 0.00
CAFD 7,000.00 6,250.00 7,500.00 2,500.00
CASH PRIORITY PROGRAM (CPP):
PARTNERS: ABY BEA CLARA
Capital 17,450 12,550 9,500

+- LOANS 0 + 7,000 + 2,500
Total Interest (TI) 17,450 19,550 12,000
Loss Absorption ��, �� , �� , ��

Potential (L.A.P.) ��% ��% ��%
= TI ÷ %PL
L.A.P. 34,900 97750 (1st Priority) 40,000 (2nd Priority)
Priority
Distribution: 34,900 97,750 40,000
0 (57,750) - (1st) 0
34,900 40,000 40,000
0 (5,100) - (2nd) (5,100) -(2nd)
39,400 (PL) 34,900 (PL) 34,900 (PL)
1st Priority: 57,750 x 20% =11,550

BEA- 11,550
5,100 x 20% = 1,020

2nd Priority:
BEA- 1,020
CLARA-1,530 5,100 x 30% = 1,530
TOTAL 14,100
*note: The total

distribution of
14,100 should be
satisfied before
using the PL ratio
to compute the
subsequent cash
distribution.
Month: January Distribution:
Cash Available for Distribution (CAFD) 7,000

Less: 1st Priority -BEA (11,550)
(Balance of 1st Priority) ( 4,550)
It shows that 1st priority distribution is not

fully satisfied. The balance of P 4,550 shall
be paid to BEA on the next month's
distribution. There being no full payment of
the 1st Priority, the 2nd priority partners will
not yet receive any amount from CAFD.
Hence, the following are distribution for the

current month:
ABY- 0
BEA- 7,000
CLARA- 0
5
Month: February Distribution:
Cash Available for Distribution (CAFD) 6,250

Less: Balance of 1st Priority -BEA (4,550) - to BEA
Excess to be distributed to 2nd Priority 1,700 Excess
*check if the excess amount of P1,700

exceeds the total amount to be distributed
under 2nd priority.
 If the answer is NO: �

1,700 x � = 680 to BEA
Distribute the excess using the PL
ratio of the partners under 2nd �
priority. 1,700 x � = 1,020 to
CLARA
 If the answer is YES:
Fully satisfy the 2nd Priority partners
and then any amount remaining shall
be distributed to ALL partners using
their PL ratio.
Hence, the following are distribution for the

current month:
ABY- 0
BEA- 4,550 + 680 = 5,230
CLARA- 1,020
PROBLEM F:Lady, Clarinel, and Jigs are in the process of liquidating their partnership.
Since it may take several months to convert the other assets into cash, the partners
agree to distribute all available cash immediately, except for P12,000 that is set aside for
contingent expenses. The balance sheet and residual profit and loss sharing
percentages are as follows:
Cash P500,000 Accounts payableP225,000
Other assets 225,000 Lady, capital (20%)168,000
Clarinel, capital (30%)270,000
. Jigs, capital (50%) 62,000
Total assets P725,000 Total liab./equity P725,000
1. Using a safe payments schedule, how much cash should Clarinel receive in
the first distribution?
A. P 81,000
B. P165,000
C. P168,600
D. P202,500
2. Using a safe payment schedule, how much cash should Lady receive in the
first distribution?
A. P 81,000
B. P 98,000
C. P168,600
D. P202,500
suggested solution: (1.B and 2.B)

20% 30% 50%
Lady Clarinel Jigs
Equities P168,000 P270,000 P62,000
Possible loss on
remaining assets (P225,000) (45,000) (67,500) (112,500)
Contingencies (P12,000) (2,400) (3,600) (6,000)
Subtotals P120,600 P198,900P(56,500)
Eliminate Jigs's debit balance(22,600) (33,900) 56,500
Safe payments P 98,000 P165,000 P 0
6
CORPORATE LIQUIDATION:
PROBLEM G:Rizal Company filed a voluntary bankruptcy petition on June 1, 2019 and the
statement of affairs reflects the following amounts:
Assets pledged with fully secured creditors has book value of P 160,000 while the estimated
realizable value amounted to P190,000. Asset pledged with partially secured creditors has
estimated realizable value of P60,000 with book value of P 90,000. But the free assets amounted
to P 140,000 and P200,000 for the realizable and book value, respectively.
Liabilities were as follows:

 Liabilities with priority----------------------------P 20,000
 Fully secured creditors--------------------------P 130,000
 Partially secured creditors---------------------P 100,000
 Unsecured creditors-----------------------------P 260,000
1. What is the Estimated Recovery Percentage for Unsecured creditors without priority?
A. 100%
B. 84%
C. 60%
D. 40%
2. If the assets are converted into cash at the estimated realizable values, What is the
ERP for partially secured creditors?
A. 100%
B. 84%
C. 60%
D. 40%
suggested solution: (1.C and 2. B)
* Total assets at Realized Value …………………………………………… 390,000

Less: FULLY Secured….….. …………….. P130,000
TUCWIP ………. …………………….. P 20,000
Partially secured (portion secured)… P 60,000 210,000
Amount available to unsecured creditors without priority 180,000
** TUCWOP:
Partially secured liabilities (unsecured portion) 40,000
Unsecured Creditors 260,000
TUCWOP 300,000
***ERP to unsecured without priority = (180,000 ÷ 300,000) = 60%

**** Partially secured creditors = Asset pledged 60,000 + unsecured portion
(40,000 x ERP of 60%) = 84,000
Thus, ERP for partially secured is equal to 84% = 84,000 ÷ 100,000
TUCWIP – Total Unsecured Creditors WIth Priority

TUCWOP – Total Unsecured Creditors WithOut Priority
PROBLEM H: MARCON Co. has been undergoing liquidation since January 1. As of March 31,
its condensed statement of realization and liquidation is presented below:
Assets:
Assets to be realized P2,062,500
Assets acquired 1,125,000
Assets realized 1,800,000
Assets not realized 2,062,500
Liabilities:
Liabilities liquidated 2,812,500
Liabilities not liquidated 2,550,000
Liabilities to be liquidated 3,375,000
Liabilities assumed 2,437,500
Revenues and Expenses:
Supplementary charges 4,687,500
Supplementary credits 4,200,000
7
The net gain (loss) for the three-month period ending March 31 is
A. P250,000
B. P(325,000)
C. P425,000
D. P637,500
suggested solution: (D)

Statement of Realization and Liquidation:
Assets to be Realized: 2,062,500 3,375,000 Liabilities to be Liquidated
Assets Acquired: 1,125,000 2,437,500 Liabilities Assumed
Liabilities Liquidated: 2,812,500 1,800,000 Assets Realized
Liabilities Not 2,550,000A 2,062,500B Assets Not Realized
Liquidated 4,687,500 4,200,000 Supplemental Credits
Supplemental Charges
TOTAL 13,237,500 13,875,000 TOTAL
637,500 Net Balance: Gain
JOPINT ARRANGEMENT:
PROBLEM I:HON and DAH agreed on a Joint Operation to purchase and sell car accessories.
They agreed to contribute P25,000 each to be used in our purchasing the merchandise, share
equally in any gain or loss, and record their venture transactions in their individual books. After
one year, they decided to terminate the venture, and data from their records were:
Joint Operation account credit balances: in books of HON, P18,000; in books of DAH, P20,200.
Cost of car accessories taken: by HON, P1,000; by DAH, P1,800. Expenses paid: by HON,
P1,850; by DAH, P2,600.
1. How much was the Joint Operation’s sales?

a. P83,750
b. P86,550
c. P91,000
d. P92,650
2. How much was the Joint Operation’s gain?

a. P38,200
b. P41,000
c. P42,750
d. P45,550
suggested solution: (1.D and 2. B)
Joint Operation Profit or Loss

-Merchandise 25,000+25,000 Merchandise withdrawal
Contribution
-Purchase and Freight Purchase Returns, discounts and
In allowances
-Sales returns, 92,650 Sales and other items of income
discount and
allowances
-Expenses (paid by 1850+2600
operator or from JO-
cash)
JOA Debit balance 38.200 JOA– Credit balance
Unsold Merchandise (Ending
2,800 Inventory) ?
Net Loss 41,000 Net Profit
8
PROBLEM J: EEI and MDC formed a joint operation to produce hallow blocks and sell them to
small contractors. They agreed to share equally on all matters relating to the operation. EEI
contributed P2,000,000 cash while MDC contributed equipment costing P 2,000,000 with
accumulated depreciation of P500,000. The current fair market value of the equipment at the
time of contribution amounted to P 2,000,000.
How much gain or (loss) shall be recognized by the contributor?

A. 250,000 C. (250,000)
B. 500,000 D. (500,000)
Equipment:
Fair Value 2,000,000

(Book Value) (1,500,000)
Gain on Sale 500,000
X % ratio x50%
Gain to be recognized 250,000
Note: the joint operator who contributed shall record a non-cash asset at book
value, unless stated that such asset was carried at fair value. On the other hand the
co-operators shall recognize the said non cash asset at fair value
Cash in JO --------- 1,000,000

Equipment in JO--- 750,000
Accumulated Depreciation- 500,000
Equipment ----------------------2,000,000
Gain on Sale of Equipment -250,000
PFRS for SMEs:
Problem K: Petrona (SME A) and Shella (SME B) each acquired 30% of the outstanding shares
of CALTEXT for P 200,000 plus transaction cost of P2,000. Petrona and Shella agreed a joint
control over the CALTEXT. During the year, CALTEXT reported the following:
 Profit for the year - P 20,000
 Payment of dividends - P4,000.
It was determined after a thorough test that due to economic changes, there was an adverse
effect to CALTEXT during the latter quarter of the year. Hence, there is impairment of the
investment in the said entity.
I. If Petrona elected to carry the investment in CALTEXT using EQUITY Method and the
Fair Value of CALTEXT at year end is P 210,000 and cost to sell amounts to P3,000.
1. How much should be initially recognized by Petrona (SME A) s investment in CALTEXT?

A. 200,000
B. 202,000
C. 206,800
D. 207,000
2. How much is the amount of impairment loss recognized?

A. 0
B. 200
C. 4,800
D. 7,000
3. How much is the profit or loss related to investment?

A. 200
B. 1,200
C. 4,800
D. 6,000
4. How much is the carrying amount of investment as of year-end?
A. 200,000
B. 202,000
C. 206,800
D. 207,000
9
suggested solution: (1.B;2.A;3.D;4.C)
Investment in JCE - 202,000 [200,000 purchase price + 2,000 transaction cost]

Cash - 202,000
The transaction cost is not treated as expense but
directly attributable cost.
Cash - 1,200
Investment in JCE - 1,200 [ 4,000 dividend x 30%] = 1,200 Share in dividend. the
effect of which is to reduce the investment amount
Investment in JCE- 6,000 [ 20,000 x 30% ] =6,000
Investment Income - 6,000 The share in net income operates as addition to the
initial investment.
Fair Value less Cost to sell: (Recoverable

Amount) =210,000 - 3,000 207,000
Less: Carrying value of the investment: (206,800)

[ 202,000 - 1,200 + 6,000] 200
No Impairment Loss
II. If Petrona elected to carry the investment in CALTEXT using EQUITY Method and the
Fair Value of CALTEXT at year end is P 196,000 and cost to sell amounts to P1,800.

A. 200,000
B. 202,000
C. 206,800
D. 207,000
Same initial investment of 200,000 + 2,000 transaction cost.

A. 0
B. 200
C. 7,000
D. 12,600

A. 97,100
B. 194,200
C. 200,200
D. 206,800
suggested solution: (1.B;2.D;3.B)

Amount) = 196,000 - 1,800 194,200* Whichever is
lower becomes
Less: Carrying value of the investment: (206,800) Year End Value
[ 202,000 - 1,200 + 6,000] (12,600)
Impairment Loss
How much is the profit or loss related to investment?
A. 6,600
B. 18,600
C. (6,600)
D. (18,600)
Investment income = 30% x 20,000 = 6,000
Less Impairment loss = 194,200 - 206,800 = (12,600)
Profit or loss related to investment = (6,600)
10
III. If Petrona elected to carry the investment in CALTEXT at COST and the Fair Value of
CALTEXT at year end is P 196,000 and cost to sell amounts to P1,800.
A. 200,000
B. 202,000
C. 206,800
D. 207,000
suggested solution: (B)

Investment in JCE - 202,000 [200,000 purchase price + 2,000 transaction
Cash - 202,000 cost]
The transaction cost is not treated as expense

but directly attributable cost.
Cash - 1,200
Dividend Income - 1,200 [4,000 dividend x 30%] = 1,200 Share in
dividend recognized as dividend income.
There is no effect in the investment amount.

A. 0
B. 2,000
C. 7,800
D. 12,600

A. 97,100
B. 194,200
C. 200,200
D. 206,800
suggested solution: (2. C and 3. B)

Amount) = 196,000 - 1,800 194,200* Whichever is
lower becomes
Less: Carrying value of the investment: (202,000) Year End Value
[ 202,000] (7,800)
Impairment Loss
A. 6,600
B. 18,600
C. (6,600)
D. 18,600

Dividend income = 30% x 4,000 = 1,200
Less Impairment loss = 194,200 - 202,000 = (7,800)
IV. If Petrona elected to carry the investment in CALTEXT at FAIR VALUE and the Fair
Value of CALTEXT at year end is P 196,000 and cost to sell amounts to P1,800.
A. 200,000
B. 202,000
C. 206,800
D. 207,000
suggested solution: (A)
11
Investment in JCE - 200,000 [200,000 purchase price shall be the value of

Expense - 2,000 investment while the 2,000 transaction cost shall
Cash - 202,000 be treated as expense]
The transaction cost is not treated as expense

but directly attributable cost.
Cash - 1,200
Dividend Income - 1,200 [ 4,000 dividend x 30%] = 1,200 Share in
dividend recognized as dividend income. There is
no effect in the investment amount.

A. 0
B. 2,000
C. 7,800
D. 12,600

There is no impairment loss since the investment is carried at fair value. Any change in the fair
value shall be recognized as unrealized profit or loss but not as impairment loss.

A. 200,000
B. 196,000
C. 194,200
D. 97,100

The value of investment is at Fair Value of 196,000 since the method applied is at Fair
Value method. Hence, the change in the fair value shall be recognized as unrealized
profit or loss. In this case the unrealized loss amounts to (4,000) computed by deducting
fair value new of 196,000 by fair value old of 200,000.

A. 1,200
B. 1,800
C. 4,000
D. 4,800

Dividend income = 30% x 4,000 = 1,200
Less: Expense = Transaction cost = (2,000)
Less Unrealized loss = 196,000 - 200,000 = (4,000)
12
PFRS 15:
Five Step Model Framework [COPAR]

1. Identifying Contracts with the Customer
2. Identifying Performance Obligation
3. Determine Transaction Price
4. Allocate Transaction Price
5. Recognize Revenue when (or as) the entity satisfies performance obligation
1. IDENTIFYING THE CONTRACTS WITH CUSTOMER

Conditions:
 Approved Contract by parties
 Rights of each party in G/S can be Identified
 Terms of Payment in G/S can be Identified
 Contract has Commercial Substance
 Probable collection of the Consideration to which Entity is Entitled to in exchange
of G/S
NOTE: if not yet meet all – Re-assess the contract; If met all- the contract is within
scope of PFRS 15 *G/S stands for Good or Services
2. IDENTIFYING PERFORMANCE OBLIGATION

A. Goods and Services that are distinct:
(SEPARATE PERFORMANCE)
 The customer can benefit from the good or services on its own
 The Entity’s promise to transfer G/S can be SEPARATELY identifiable from other
promise to the customers.
B. A series of distinct goods or services that is transferred to the customer in the

SAME pattern of transfer to a customer:
(SINGLE PERFORMANCE)
 Each distinct good or service in series is consecutively transferred to a customer
would be a Performance Obligation (PO) satisfied over time
 A single method of measuring progress would be used towards complete
satisfaction of Performance Obligation to transfer each distinct G/S in the series
to customer.
13
3. DETERMINE THE TRANSACTION PRICE

Considers past customary business practices
The transaction price (TP) includes:
 An estimate of any Variable Consideration (VC) using either the: (Better
predicts Entity’s Entitlement)
• PROBABILITY WEIGHTED EXPECTED VALUE
• MOST LIKELY AMOUNT
 The effect of the Time Value of Money if there is financing components in
contract
 The Fair Value of Any non-cash consideration
For Variable Consideration:

Expected value Most Likely Amount
Consider the sum of Only consider the
probability weighted single most likely
amounts for the range amount from the range
of possible outcome of possible
consideration amounts.
This is appropriate It is appropriate to use

estimate if the entity this estimate if the
has large number of contract has only few
contract with similar possible outcome
characteristic
4. ALLOCATE THE TRANSACION PRICE TO PERFORMANCE OBLIGATION

 Applicable when contract has multiple PO.
The allocation bases:
1. Relative Stand Alone Selling Price (Rela-SAP)
2. If Relative Stand Alone Price is not observable,
Entity must estimate using:
 ADJUSTED MARKET ASSESSMENT APPROACH (MV-Approach)
 EXPECTED COST PLUS MARGIN APPROACH (Cost-plus
Approach)
 RESIDUAL APPROACH (only in limited instance)
14
5. RECOGNIZE REVENUE AS THE ENTITY SATISFIES PERFORMANCE

OBLIGATION
 REVENUE is recognized as CONTROL is passed either:
A. Over Time
B. At the Point in Time
 CONTROL – is the ability to direct the use of and obtain substantially all the
remaining benefits of an asset.
* Possession of thing and enjoyment of right in the concept of an owner.
A. Over Time:
Following Criteria:
 the customer simultaneously RECEIVES and CONSUMES all the benefits
provided by the entity
 The Entity CREATES or ENHANCE the value of asset controlled by the
Customer
 The PO does not create an asset with alternative use to the entity and the
Entity has an ENFORCEABLE RIGHT to payment for the performance
completed to date
*ONE Criteria met is sufficient to recognize revenue Over time.

However, if none of the above criteria is present in the problem, recognize the
revenue At Point in Time.
B. At Point in Time:
 Revenue is recognized when control is passed at the point in time. It includes but
not limited to:
 The entity has the present right to payment for asset
 The customer has:
1. Physical Possession of Asset
2. Accepted the Asset
3. Legal title to asset
4. Significant Risk and Reward related to ownership of asset
Does Customer simultaneously receive and YES Recognize Revenue OVER TIME
consume the benefits provided by the entity's
performance?
NO
Does Entity's performance creates or enhances an YES Recognize Revenue OVER TIME
asset that the customer controls as the asset is
created or enhanced?
NO
Does Entity's performance not create an asset with YES Recognize Revenue OVER TIME
an alternative use to the entity and the entity has
an enforceable right to payment (for performance
completed to date)
NO
Recognize Revenue AT POINT IN TIME
15
PROBLEM L: On January 1, 2019, PLDTee enters into wireless contract in which

customer MVP is provided with handset and a voice and data plan for P 3,500 per
month. PLDtee identified the handset and wireless plan as separate performance
obligations.
The handset can be separately sold by PLDtee for a price of 20,000 which provides
observable evidence of stand-alone selling price. PLDtee offers a 12-month service plan
without a phone that includes the same level of services for a price of 2,500 per month.
1. How much is the total transaction price to be allocated to the separate

performance obligation?
a. P 20,000
b. P 30,000
c. P 42,000
d. P 50,000
suggested answer (C)
3,500 x 12 months =
42,000
2. How much of the transaction price to is allocated to the wireless plan?

a. P 16,800
b. P 22,000
c. P 25,200
d. P 30,000
3. How much of the transaction price to is allocated to the handset?

a. P 16,800
b. P 20,000
c. P 22,000
d. P 25,200
suggested answer (15.C;16.A)
Performance Stand Alone Ratio based Allocated
Obligation Price (SAP) on SAP Transaction Price
a. Wireless plan 2,500 x12=30,000 60% 25,200
b. Handset 20,000 40% 16,800

TOTAL 50,000 100% 42,000
4. On January 1, 2019, what is the entry at the inception of the contract?
a. Receivable 42,000
Revenue - 42,000
b. Receivable - 42,000
Equipment Revenue - 16,800
Service Revenue - 25,200
c. Contract Asset - 16,800
d. Receivable - 25,200
Contract Asset - 16,800

PLDtee does not have the legal right to invoice the transaction
price at the inception of the contract. Hence, a contract asset is
debited for the transfer of handset to MVP instead of receivable.
Since there is performance of a separate obligation to deliver the
handset, the equipment revenue shall be recognized.
16
5. On January 31, 2019, what is the entry to record the monthly billing of monthly
fee?
a. Receivable - 3,500
Revenue - 3,500
b. Receivable - 3,500
c. Receivable - 3,500
Contract Asset - 1,400
d. Cash - 3,500
Receivable - 3,500

The billing every month for the service provided shall give rise to
service revenue of P 2,100 [P25,200 ÷ 12 months]. More so, a
credit to contract asset shall be recorded for the billing of the
handset delivered at the inception of the contract. The contract
asset account amounted to P 1,400 per month [P16,800 ÷ 12
months]
The delivery of handset is a separate performance obligation

satisfied on January 1, 2019. Hence, the equipment revenue was
recognized on the said date with corresponding debit to contract
asset account.
PROBLEM M: Mang Turkz Food Corporation enters into franchise agreement on June 1,
2018 with Mr. Shawa Warma for a package with total fee of P 500,000. The right granted
is to operate the business for 4 years. The terms of payment provide that a down
payment of P 180,000 shall be paid and balance is payable in 4 years. Mr. Warma
issued an 8% non-interest bearing note for the balance. (PV of ordinary annuity
3.31212). The agreement provides for a royalty payment of 2% of the monthly gross
sales.
The total fee of P500,000 includes the following with their stand-alone prices:
 Rights to trade name and market area .......... 250,000

 Machinery and Equipment (Food Stall)
(cost 80,000) ............. 100,000
 Site location; feasibility studies;
Training and other services......................50,000
All the services inclusive in the package were performed as of October 30, 2018 while
the equipment was installed only on January 1, 2019. The franchise commenced
operations on January 15, 2019. The total gross sales in 2019 amounted to P 1,500,000.
1. Using old franchise accounting (not applying PFRS 15), how much revenue
from initial franchise fee shall be recognized on December 31, 2018?
A. 0
B. 12,365.25
C. 264,969.60
D. 444,969.60
2. Using old franchise accounting (not applying PFRS 15), how much revenue
shall be recognized on December 31, 2018?
A. 0
B. 12,365.25
C. 264,969.60
17
D. 444,969.60
Suggested solution (1.A and 2.B)

Since the SPC requirements were not yet satisfied and notwithstanding the
performance of training services, the franchisor shall recognize unearned franchise
revenue of P 444,969.60 and interest income of P 12,365.42 on December 31, 2018.
Down payment 180,000.00

+ PV of the note 264,969.60
Unearned Franchise Revenue 444,969,60
PV of the note 264,969.60

X Interest rate x 8%
X for 7 months [June 1- Dec 31] x 7/12
Interest Income (revenue) 12,365.25
3. If Mang Turkz Food Corpration satisfied the obligation at point in time as when
Mr. Warma has obtained control of the rights, how much of the total contract price
is allocated to the transfer of rights, sale of equipment and services? (applying
PFRS 15)
A. 250,000; 100,000 and 50,000

B. 312,500; 125,000 and 62,500
C. 278,106; 111,242.40 and 55,621.20
D. 444,969.40; 0 and 0
Allocation of transaction price:

Total Contract price 500,000.00
(less Discount on Notes) ( 55,030.40) = 320,000 (face) - 264,969.60
Contract price at PV 444,969.60 (to be allocated)
Composition: Stand Ratio Contract price Allocated

Alone to be allocated Contract
Price Price
Rights 250,000 x 62.5% 444,969.60 = 278,106.00*
Equipment 100,000 x 25 % 444,969.60 = 111,242.40**
Service 50,000 x 12.5% 444,969.60 = 55,621.20***
Total 400,000 100% 444,969.60
Mr. Warma has obtained control of the rights, how much revenue shall be
recognized in December 31, 2018? (applying PFRS 15)
A. 12,365.25
B. 45,621.20
C. 67,986.45
D. 377,334.65
18
Service Revenue - 55,621.20

Interest revenue - 12,365.25
Total Revenue 2018 - 67,986.45
Illustration:
June 1, 2018: (signing of contract)
Cash ---------------- 180,000

Notes Receivable - 320,000
Unearned Interest Income --------------- 55,030.40
Unearned Franchise Revenue------------- 278,106.00*
Unearned Sales Revenue (equipment) -- 111,242.40**
Unearned Service Revenue ---------------- 55,621.20***
October 30, 2018: (Completion of service)
Unearned Service revenue - 55,621.20

Service Revenue ------55,621.20
December 31, 2018: (Recognition of interest)
Unearned Interest Income - 12,365.25

Interest revenue (income) - 12,365.25
PV of the note 264,969.60

X for 7 months [June 1- Dec 31] x 7/12
Interest Income (revenue) 12,365.25
Mr. Warma has obtained control of the rights, how much revenue shall be
recognized in December 31, 2019? (applying PFRS 15)
A. 228,105.87
B. 319,348.22
C. 337,801.67
D. 437,801.85
19
Sales Revenue - Equipment - 111,242.40

Franchise Revenue - Rights - 278,106.00
Royalty-franchise revenue - 30,000.00
Interest Revenue - 18,453.45
Total revenue 2019 - 437,801.85
January 1, 2019: (installation of equipment and completion of obligation)

Unearned Sales Revenue (equipment) - 111,242.40
Sales Revenue (Equipment) ----------111,242.40
Cost of Franchise -equipment sale - 80,000

Equipment ---------------------------- 80,000
Unearned Franchise Revenue - 278,106

Franchise Revenue (rights)--------278,106
December 31, 2019: (recognition of interest revenue and royalty)

Receivable / cash - 30,000
Franchise Revenue(royalty) -- 30,000
Gross Sales - 1,500,000

X Royalty % x 2%
Royalty fee - 30,000 (continuing franchise fee)
Unearned Interest income - 18,453.45

Interest revenue (income) - 18,453.45
To compute interest 2019:

PV of the note 264,969.60 (as of June 1, 2018)
X for 5 months x 5/12 [1/1/2019 up to 5/31/ 2019]
Interest Income (revenue) 8,832.32 recognized in 2019
PV of the note [June 1, 2018] 264,969.60

Multiply 1 + interest rate: x 1.08
Less periodic payment: (80,000)
PV of note [June 1, 2019] 206,167.16
X interest rate x 8%
X for 7 months x 7/12 [6/1/18 up to 12/31/18]
Interest income (revenue) 9,621.13 recognized in 2019
Total interest income 2019 = 8,832.32 + 9,621.13 =18,453.45
6. If Mang Turkz Food Corpration satisfied the obligation and provides access to
the rights and must continue (recognized over time) to perform updates and
services, how much revenue shall be recognized in December 31, 2018? (applying
PFRS 15)
A. 12,365.25
B. 45,621.20
C. 67,986.45
D. 229,222.35

Same solution in item number 24.
Since there is no completion yet as to the obligation that warrant the recognition of revenue from
franchise rights, the Unearned franchise revenue of 278,106 is still outstanding. Hence, no
franchise revenue shall be recognized from said rights in 2018. However, the completion of
service warrants recognition of franchise service revenue. Moreover, the passage of time
warrants the recognition of interest revenue earned from June 1, 2018 up to December 31,
2018.
Service Revenue - 55,621.20

Interest revenue - 12,365.25
Total Revenue 2018 - 67,986.45
20
7. If Mang Turkz Food Corpration satisfied the obligation and provides access to
the rights and must continue (recognized over time) to perform updates and
services, how much revenue shall be recognized in December 31, 2019? (applying
PFRS 15)
A. 45,621.12
B. 155,316.97
C. 166,863.52
D. 229,222.35
Sales Revenue - Equipment - 111,242.40 = Refer to item No. 25 solution

Franchise Revenue - Rights - 69,526.50 = 278,106 ÷ 4 years
Interest Revenue - 18,453.45* = Refer to item No. 25 solution
Royalty-Franchise revenue - 30,000.00 = 1,500,000 x 2%
Total revenue 2019 - 229,222.35
Recognition of Franchise Revenue 2019: (Over Time)
Franchise Rights recognized over time:

Unearned Franchise Revenue - 69,526.50
Franchise Revenue - 69,526.50
Recognition of royalty:
Accounts Receivable - 30,000
Franchise Revenue ---30,000
LTCC:
PROBLEM N: On July 1, 2017, Dinar obtained a contract to construct a building. The

building was estimated to be built at a total cost of P15,000,000 and is scheduled for
completion on October 2019. The contract contains a penalty clause to the effect that
the other party was to deduct P35,000 from the contract price for each week of delay.
On the other hand, if the contractor was able to finish the building earlier than agreed, it
will be rewarded an amount equal to P50,000 for every month of early completion.
Furthermore, cost escalation clause was included in the contract. In 2018, the estimated
costs of particular construction material amounting to P520,000 were bought for
P780,000. The increase in the contract price related to this cost escalation was
approved by the client. Completion was delayed for 4 weeks. The records show:
2017 2018 2019

Costs incurred P 1,750,000 6,440,000 1,085,000
Estimated cost to complete 7,000,000 1,810,000 ---
Progress billings 1,400,000 15,225,000 4,200,000
1. What is the Original Contract Price 2017?

a. 20,780,000
b. 20,390,000
c. 20,705,000
d. 20,825,000
2. What is the Original Contract Price 2018?

a. 20,780,000
b. 20,425,000
c. 20,705,000
d. 20,965,000
3. What is the CIP net as of 2018?
a. 545,335 due from
b. (545,335) due to
c. 316,015 due from
d. (316,015) due to
Suggested Solution: (1.C; 2.D;3.A)
21
Cost escalation = 780,000 -520,000 =260,000

Delayed = 4 x 35,000 = 140,000
*OCP + Cost Escalation – Delayed + Reward = New Contract Price (Adjusted)

** New Contract Price = Total Progress Billings as of last year of construction
Thus, 1,400,000 + 15,225,000 + 4,200,000 = 20,825,000 new CP

1) **Original Contract Price = 20,705,000
+ Cost Escalation clause in 2018 260,000
+ Reward for early completion in 2019 0
- Penalty for late completion in 2019 (140,000)
New Contract Price = 20,825,000
2) 2018: OPC (20,705,000) + Cost Esc. (260,000) = 20,965,000 as of 2018

CIP = CP x %Completion
= 20,965,000 x 81.90% = 17,170,335
PB = 1,400,000 + 15,225,000 =16,625,000
CIP net (due from) = 545,335
PROBLEM O: COLUMBAN Industries, Inc. was contracted to construct a two-storey

national library for P50,000,000 in 2019. The project was to be completed in three years
and the stipulation of the contract were as follows:
 15% mobilization fee is to be deducted from the last billing of the contract
 10% retention on all billings
 Payment of progress billings shall be made in 20 days after acceptance
COLUMBAN uses cost-to-cost method in estimating the percentage of completion. As of

the year 2019, 45% of the contract price has been realized as revenue. As to billings
made, 40% of the contract price has been presented and accepted. All progress billings
accepted were paid by the client except for the last billing which was equivalent to 5% of
the contract price that was accepted last December 24, 2019.
How much was paid by the client to COLUMBAN in 2019?

a. 2,250,000
b. 15,750,000
c. 18,000,000
d. 23,250,000
suggested solution:(D)
50,000,000 *40% = 20,000,000 x 90% (net retention) =18,000,000
Accepted Billings net of retention
Less: Billings equivalent to 5%of TCP
are accepted but not yet paid = 5%x 50M x 90% = (2,250,000)
Collection from billings net retention 15,750,000

Mobilization fee paid 7,500,000 (15% x 50M)
Total Payment made by client 23,250,000
22
HOBAT:
(INTERBRANCH TRANSACTION)
PROBLEM P: ROLAND company maintains branches that market the products it
produces. Merchandise is billed to the branches at cost, with the branches paying the
freight charges from the Home office to the branch. On May 27, LANDERZ-branch ships
a portion of its merchandise to ROBINSON-branch upon authorization by Home Office.
Originally, LANDERZ-branch had been billed for this merchandise at P25,000 and paid
freight charges of P3,125 on the shipments from Home Office. ROBINSON-branch, upon
receiving the merchandise, pays freight charges of P1,875 on the shipment from
LANDERZ-branch. If the shipment had been made from the Home office directly to
ROBINSON-branch, the freight cost to ROBINSON-branch would have been P4000.
1. How much is the excess freight cost to be credited in the books of Home
Office?
a. P 0
b. P 1,000
c. P 2000
d. P 2,750
2. How much is the ROBINSON- branch current in the books of the Home
Office?
a. P 25,000
b. P 26,875
c. P 27,125
d. P 28,125
3. Upon receipt of shipment by ROBINSON-branch, freight in is debited in the

amount of?
a. P 1,000
b. P 1,875
c. P 2,125
d. P 4,000
4. Home office current is debited by LANDERZ-branch by how much?

a. P 25,000
b. P 26,875
c. P 27,125
d. P 28,125
Suggested solution: (1.A;2.C;3.D;4.D)

Landerz Robinson
(25,000) (SFHO) SFHO 25,000
(3,125) FIN-Actual FIN-Should be 4,000
(0) (Cash Out) (Cash Out) (1,875)
(28,125) Home Office Home Office 27,125
Current Current -
(Debit) Credit
Actual Freight 3,125 + 1,875 = 5,000

Less: Should be Freight (4,000)
Excess Freight - Debited in the HO Book 1,000 dr
PROBLEM Q: STEPHEN CLARI Company (SSC) opens an agency in Clark Oakland

Pampanga. The following transactions for the month of May 1, 2017:
 Home office sends a check for P 55,000 to the agency as working fund, shipped
to the agency: Samples – 200,000 and advertising materials – 20,000.
 The Home office fills up sales orders sent by the agency for P 1,500,000 worth of
merchandise.
 The cost of merchandised shipped is P 800,000. The agency collected 833,000,
net of 2% discount.
 The working fund is replenished for the delivery expense, maintenance and store
supplies amounting to P 5,500; P 3,500; and 6,000 respectively.
23
 The agency exhausted 50% of the samples while 60% of the advertising
materials were still unused.
How much is the net income (loss) of the agency for the month ended May 31,
2017?
a. P 170,000
b. P 460,000
c. P 560,000
d. P 570,000

Sales 1,500,000
(Cash discount) = 833,000÷0.98 x (17,000)
0.02
Net Sales 1, 483,000
( Cost of Goods Sold) 800,000
Gross Profit 683,000
(Operating Expenses):
- delivery (5,500)
-maintenance (3,500)
-store supplies (6,000)
- used samples (200,000 x 50%) = (100,000)
- used advertising (20,000 x 40%) = (8,000)
materials TOTAL = (123,000)
Net Income 560,000
BUSINESS COMBINATION:
FULL PFRS vs PFRS for SMEs:
PROBLEM R: On January 1, 2019, SME X acquired 80% of the outstanding voting

stocks of WRC Entity for P 500,000. On the same date, the book value net asset of
WRC was 450,000 and the land account is understated by 75,000. The transaction cost
incurred and paid amounted to 5,000 and 1,000 for direct and indirect cost, respectively.
1. How much is the amount of consideration transferred or cost of the business

for purposes of computing goodwill under Full and Pfrs for SMEs, respectively?
A. 500,000; 500,000
B. 500,000; 495,000
C. 500,000; 505,000
D. 505,000; 500,000

Full PFRS PFRS for SMEs
Consideration transferred - 500,000 Consideration transferred - 500,000
Plus: Transaction cost - 5,000
The transaction cost of 5,000 is Total Cost of business - 505,000
treated as Expense.
2. Under Full PFRS: how much is the amount of full goodwill to be recognized as a
result of combination?
A. 80,000
B. 100,000
C. 105,000
D. 125,000
Suggested solution: (B)

Consideration Transferred 500,000
+ NCI at Fair Value implied 125,000 = [(500,000÷80%) x
Total value of Acquiree 20%]
- Fair Value net Asset of 625,000
Acquiree (525,000) = [450,000 +
Goodwill 75,000]
100,000 (full)
24
3. Under Full PFRS: how much is the amount of partial goodwill to be recognized
as a result of combination?
A. 80,000
B. 100,000
C. 105,000
D. 125,000

+ NCI at PSB 105,000 = [(525,000) x
Total value of Acquiree 20%]
- Fair Value net Asset of 605,000
Acquiree (525,000) = [450,000 +
Goodwill 75,000]
80,000 (partial)
4. Under PFRS for SMEs, how much is the amount of goodwill to be recognized as
a result of combination?
A. 80,000
B. 85,000
C. 105,000
D. 110,000

+ Direct Cost 5,000
Total consideration 505,000
+NCI at PSB always 105,000 =[(450,000+75,000) x 20%]
Total Value of Acquiree 610,000
- Fair Value Net Asset of Acquiree (525,000)
Goodwill 85,000
FOREX:
Problem S: On September 30, 2015, CCC ordered MACHINERY from a Japanese

firm. The purchase order is non-cancelable. The purchase price is 5,000,000 yens with
delivery and payment to be on March 31, 2016. On September 30, 2015, CCC entered
into forward contract to buy 5,000,000 yens on March 31, 2016. On March 31, 2016, the
MACHINERY was delivered.
9/30/2015 12/31/2015 3/31/2016
Spot rate 0.38 0.42 0.46

Forward rate 0.39 0.44 -
1. The December 31, 2015 profit or (loss), net foreign exchange gain or (loss)
(Forward contract and commitment)?
a. 0
b. 50,000
c. 100,000
d. 250,000
2. The March 31, 2016 profit or (loss), foreign exchange gain or (loss) (Forward
contract)?
a. 0
b. 50,000
c. 100,000
d. (100,000)
25
3. The March 31, 2016, foreign exchange gain or (loss) (on firm commitment),
to be presented in OCI?
a. 0
b. 50,000
c. 100,000
d. (100,000)
4. What is the Firm Commitment Account balance as of September 30, 2015?

a. 0
b. 50,000
c. 100,000
d. (100,000)
5. What is the Firm Commitment Account balance as of December 31, 2015?

a. 250,000 Asset
b. (250,000) Liability
c. 350,000 Asset
d. (350,000) Liability
6. The fair value of the forward contract on September 30, 2015

a. 0
b. 250,000
c. (250,000)
d. (350,000)
7. The fair value of the forward contract on December 31, 2015?

a. 0
b. 250,000
c. (250,000)
d. (350,000)
8. What is the value of the equipment on September 30, 2015?

a. 0
b. 1,900,000
c. 1,950,000
d. 2,300,000
9. What is the value of the equipment on March 31, 2016?

a. 0
b. 1,900,000
c. 1,950,000
d. 2,300,000
26
suggested solution [13.A; 2.C; 3.A; 4.A; 5.B; 6.A; 7.B; 8.A; 9.C]
Hedge Instrument (Forward Contract) Hedge item (Firm Commitment FV)
 Use Forward Rate and  Non-cancellable order
 apply the concepts discussed in  Set up Firm Commitment Account
Speculation to Sell Foreign  Perfect Hedge because NET FoRex
Currency Gain or Loss is always zero (o)
Novt 1: (0.39 X 5,000,000 FCU) Sep 30:
FC Receivable - 1,950,000 No Entry

Peso Payable - 1,950,000
Dec 31: (0.44-0.39) x 5,000,000 FCU Dec 31: Set up FIRM Com Acct.
FC Receivable - 250,000 FoRex Loss - 250,000

FoRex Gan - 250,000 Firm Commitment -250,000
Hence, Net forex gain or loss is ZERO
Mar 31: (0.46- 0.44) x 5,000,000 Feb 1: (40.50 -40.25) x50,000
FC Receivable - 100,000 FoRex Loss - 100,000

FoRex Gan - 100,000 Firm Commitment -100,000
Peso Payable - 1,950,000 Hence, Net forex gain or loss is ZERO

Cash - 1,950,000
Purchase of Equipment:
Investment in FCU - 2,300,000
FC Receivable - 2,300,000 (0.46 x 5,000,000)
Equipment - 2,300,000
Cash - 2,300,000 Cash - 2,300,000
Investment in FCU - 2,300,000
Adjustment: Closing of Firm Com Acct
Firm Commitment [100,000 + 250,000]
Firm Com Acct - 350,000

Equipment - 350,000
Hence, the value of equipment is
adjusted to P 1,950,000.
Shortcut: The value of equipment is at

Forward Rate on Transaction date or same
as value of PESO payable.
(0.39 x 5,000,000 = 1,950,000).
PROBLEM T: Native Corporation, a domestic corporation, holds 100% interest of

Imported Corporation, operating in Japan. This ownership interest was acquired when
Imported Corporation was initially incorporated. The trial balance of Imported
Corporation at December 31, 2017 is presented below:
Cash JPY 40,000

Accounts Receivable 20,000
Inventory, end 60,000
Plant and Equipment – net 100,000
Cost of Sales 110,000
Depreciation Expense 10,000
Other Expenses 50,000
Notes Payable JPY
60,000
Ordinary Shares 100,000
Retained Earnings, Beg. 50,000
Sales 180,000
Total JPY JPY
390,000 390,000
The ordinary shares were issue four years ago when the exchange rate was P0.35. The
weighted average exchange rate for 2017 was P0.53. The spot rate for the yen was
P0.48 on January 1, 2017 and P0.58 on December 31, 2017. The translated amount of
retained earnings, beginning was P22,500.
27
1. How much is the total assets translated in Philippine peso?

a. P77,000
b. P105,600
c. P116,600
d. P127,600
2. How much is the translated amount of net income?

a. P3,500
b. P4,500
c. P5,300
d. P5,800
suggested solution:(1.D and 2.C)
Total Assets at JPY x Closing Rate = Translated Assets

Translated Assets = 220,000 x 0.58 = 127,600
Sales 180,000
Cost of Sales - 110,000
Gross Profit 70,000
Depreciation - 10,000
Other Expense - 50,000
Net Income 10,000
Net Income at JPY x Average Rate = Translated Income

Translated Income = 10,000 x 0.53 = 530,000
Consignment sales:
PROBLEM U: Bulldog Manufacturing Corp. consigned ten refrigerators to Poodle Sales

Co. These refrigerators had a cost of P180 each. Freight on the shipment was paid by
Bulldog in the amount of P120.
Poodle Sales Co. submitted an account sales stating that it had sold six refrigerators and
remitted the P1,365 balance due Bulldog after the following deductions from the selling
price of the refrigerators:
Commission 15% of selling
price
Marketing expenses P90
Delivery and installation of items sold P60
Cartage cost paid upon receipt of P15
consignment
1. The consignee sold the 6 refrigerators for a total of

a. P1,080
b. P1,152
c. P1,530
d. P1,800
suggested solution: [D]

Remittance 1,365
+ Marketing expense 90
+ Delivery expense 60
+ Cartage Cost 15
Total net of Commission 1,530
÷ (100%- Commission %) 85%
Total Sales 1,800
28
2. The commission earned on the sale of the 6 refrigerators by Central Sales Co.
was
a. P162
b. P180
c. P250
d. P270
suggested solution: [D]

Total Sales 1,800
X % Commission 15%
Commission earned by Consignee 270
3. The consignor’s net profit from the sale of the consigned goods was
a. P219
b. P285
c. P600
d. P800
suggested solution: [A]

Total Sales 1,800
Less Cost of Sales:
BI (180 x 10) 1,800
Freight 120
Cartage cost 15
Total Cost of 10 units 1,935
÷number of units 10
Cost per unit (CPU) 19.35
X units sold 6
Cost of Sales 1,161 = (1,161)
Gross Profit 639
Less: Delivery Expense (60)
Marketing Expense (90)
Commission Expense (270)
Net Profit P 219
Build Operate Transfer:
Problem V: Suppose San Mig Infrastructure enters into a contract to provide

construction services and operation services with the following conditions:
 Construction cost - P 50,000,000
 Finance revenue to be recognized over the life of the SCA - P 5,000,000
 Cash flows received over the life of the SCA - P 100,000,000
Based on the stand alone selling prices of the performance obligations, and taking into
account the significant financing component, the entity allocates P 55,000,000 to
construction services and P 40,000,000 to the operation services. Assume that the
significant financing component relating to the contract asset is P 1,000,000.
1. Prepare the Journal Entry during the Construction phase under the financial
asset model.
2. Prepare the Journal Entry during the Operation phase under the financial asset
model.
29
During the Construction phase:
Cost of construction (P/L) - 50,000,000
Cash -------50,000,000
Contract Asset - 55,000,000
Construction Revenue - 55,000,000
Finance Revenue - 1,000,000
At the end of the construction phase:
Financial Asset - 56,000,000
During the Operation Phase:
Finance Revenue - 4,000,000
Financial Asset 40,000,000
Revenue - 40,000,000
Cash - 100,000,000
Problem W: IYSB Construction company has entered into a service concession

arrangement (SCA) to construct a bridge for the government and manage it for 15
years, after which time the government will control the residual interest in the bridge.
IYSB Construction company will charge the public for using the bridge at a rate
determined by the government. IYSB accounts for this SCA under the intangible assets
model.
The details of the contract are:
* Cost of construction = P 200,000,000
* Cash flows over the life of the arrangement = P 450,000,000
IYSB identifies the construction services as a separate performance obligation and

determines the fair value of the resulting intangible assets indirectly by reference to
the stand alone selling prices of the construction service, being P 225,000,000.
30
1. During the construction phase, how much should the operator recognize as
revenue over the term of the arrangement?
A. P 200,000,000
B. P 225,000,000
C. P 525,000,000
D. P 450,000,000
2. During the construction phase, how much intangible asset shall be recognized
over the term of the arrangement?
A. P 200,000,000
B. P 225,000,000
C. P 525,000,000
D. P 450,000,000
3. During the operational phase, how much should the operator recognize as
revenue over the term of the arrangement?
A. P 200,000,000
B. P 225,000,000
C. P 525,000,000
D. P 450,000,000
4. During the operational phase, how much amortization expense shall be debited
by the operator over the term of the arrangement?
A. P 200,000,000
B. P 225,000,000
C. P 525,000,000
D. P 450,000,000
31
During the Construction Phase:
Cost of Construction - 200,000,000
Cash - 200,000,000
Intangible Asset - 225,000,000
Revenue - 225,0000
During the operational Phase:
Amortization Expense - 225,000,000
Intangible Asset - 225,000,000
Cash - 450,000,000
Revenue - 450,000,000
32

(Ast) Iysb Quicknotes Afar Preweek 2021

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

(Ast) Iysb Quicknotes Afar Preweek 2021

Uploaded by

Copyright:

Available Formats

AFAR QUICKNOTES REVIEW

By: ATTY. IVAN YANNICK SAROL BAGAYAO CPA, MBA

ADVANCE FINANCIAL ACCOUNTING AND REPORTING

Upon formation, capital balances are

Suggested Solution: (A)

Accounts Payable P 45,750 P18,000

suggested Solution: (C)

suggested solution: (1.A;2.C; 3.B)

TOKYO NAIROBI TOTAL

1. How much cash should JAMIE contribute?

2. How much should be the credited to Jamie capital?

Suggested Solution: (1.A and 2.C)

Note: since Adjusted Capital of A) Distribute Bonus to new

JANUARY FEBRUARY MARCH APRIL

CASH PRIORITY PROGRAM (CPP):

PARTNERS: ABY BEA CLARA

Capital 17,450 12,550 9,500

Loss Absorption ��, ��� ��, ��� ��, ���

1st Priority: 57,750 x 20% =11,550

5,100 x 20% = 1,020

*note: The total

Month: January Distribution:

Cash Available for Distribution (CAFD) 7,000

It shows that 1st priority distribution is not

Hence, the following are distribution for the

Month: February Distribution:

Cash Available for Distribution (CAFD) 6,250

*check if the excess amount of P1,700

 If the answer is NO: �

Hence, the following are distribution for the

suggested solution: (1.B and 2.B)

Liabilities were as follows:

suggested solution: (1.C and 2. B)

* Total assets at Realized Value …………………………………………… 390,000

***ERP to unsecured without priority = (180,000 ÷ 300,000) = 60%

TUCWIP – Total Unsecured Creditors WIth Priority

suggested solution: (D)

1. How much was the Joint Operation’s sales?

2. How much was the Joint Operation’s gain?

suggested solution: (1.D and 2. B)

Joint Operation Profit or Loss

Net Loss 41,000 Net Profit

How much gain or (loss) shall be recognized by the contributor?

Fair Value 2,000,000

Cash in JO --------- 1,000,000

PFRS for SMEs:

1. How much should be initially recognized by Petrona (SME A) s investment in CALTEXT?

2. How much is the amount of impairment loss recognized?

3. How much is the profit or loss related to investment?

suggested solution: (1.B;2.A;3.D;4.C)

Investment in JCE - 202,000 [200,000 purchase price + 2,000 transaction cost]

Fair Value less Cost to sell: (Recoverable

Less: Carrying value of the investment: (206,800)

1. How much should be initially recognized by Petrona (SME A) s investment in CALTEXT?

Same initial investment of 200,000 + 2,000 transaction cost.

3. How much is the carrying amount of investment as of year-end?

suggested solution: (1.B;2.D;3.B)

Fair Value less Cost to sell: (Recoverable

How much is the profit or loss related to investment?

1. How much should be initially recognized by Petrona (SME A) s investment in CALTEXT?

suggested solution: (B)

The transaction cost is not treated as expense

2. How much is the amount of impairment loss recognized?

Loss Absorption ��, �� , �� , ��